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Sunday, December 29, 2013

Until now, all of my posts about
history-making lawsuits between distillers have involved really old cases. Some have dated back
practically to the birth of bourbon, like my post on the lawsuit between James
Pepper and Labrot & Graham (How
Woodford Reserve got to keep the (old) name of its Distillery), which
traced events beginning in the late 1700’s.
The “newest” lawsuit discussed in my posts (the origin story of Maker’s
Mark: The
Rise of Maker's Mark) still dealt with events occurring 70 years ago.
History is usually old by definition, but a decision not even two years
ago helps show how the bourbon industry is still at the forefront of trademark
law. Even though it’s not old, it is
already part of bourbon lore.

This new history, of course, was
the lawsuit between Maker’s Mark and Diageo over trademark rights to the iconic
dripping red wax seal. Bill Samuels, Sr.
broke from Country Distillers and struck out on his own, and ever since Maker’s
Mark began production in 1958, it has capped its bottles with a red dripping
wax seal that partially covers the neck of the bottle and drips down to the
bottle’s shoulder. As noted by the
District Court in Maker’s Mark
Distillery, Inc. v. Diageo North America, Inc., 703 F. Supp. 2d 671 (W.D.
Ky. 2010), “That design was the brainchild of Margie Samuels, mother of Maker’s
Mark’s current president Bill Samuels, who was still at home when his mother
perfected the dripping wax in their family’s basement.”

Maker’s Mark registered this
trademark in 1985, describing it as the “wax-like coating covering the cap of
the bottle and trickling down the neck of the bottle in a freeform irregular
pattern.” This coincided with an
extensive marketing push by Maker’s Mark, and through even more marketing ($22MM annually in 2010) Maker’s Mark
eventually reversed its ratio of selling 90% of its bourbon in Kentucky to
selling 90% of its bourbon outside of
Kentucky.

Problems arose in 2001 when Diageo
marketed “Jose Cuervo Reserva de La Familia,” which used a red freeform
wax-like seal cap. Here are the two
competing products:

Maker’s Mark filed its Complaint in
2003 and that was enough for Jose Cuervo to start snipping the wax tendrils,
although it continued to use a red wax seal and it used the lawsuit to ask the
court to cancel the trademark registration on the ground that it was functional
and because other alcoholic beverages were already being sealed in colorful
wax. A six-week trial was held beginning
in November 2009. Bill Samuels
testified, along with then-Master Distiller Kevin Smith, company finance and
marketing officers, and even experts on issues like markets and consumer
recognition of brands, damages, wax composition, Maker’s Mark memorabilia and a
bottle closures.

On April 2, 2010, the District
Court ruled that Diageo infringed on Maker’s Mark’s trademark, and therefore it
issued an injunction in favor of Maker’s Mark.
However, the District Court refused to award any damages because Maker’s
Mark did not prove that anyone was actually
confused or that it lost any sales. But
because Maker’s Mark won on the injunction claim, the Court awarded nearly $67,000.00
in costs to Maker’s Mark.

The case was far from over,
however. Diageo appealed to the United
States Court of Appeals for the Sixth Circuit.
Maker’s Mark Distillery, Inc. v.
Diageo North America, Inc., 679 F.3d 410 (6th Cir. 2012). On appeal Diageo argued that purchasers of
Jose Cuervo Reserva de la Familia – “a $100 per bottle luxury tequila” – were
unlikely to ever be confused that their prized tequila was affiliated with an
inexpensive bourbon like Maker’s Mark, especially Cuervo consumers, who
“generally are tequila connoisseurs who spend more than $100 for a bottle of
tequila, or $16-20 for a drink in a bar.”
Reading the brief, I could feel the pretentiousness dripping from those
words.

Plus, Diageo argued that Maker’s
Mark was hardly the first company to use a dripping wax seal on a bottle. Wax seals have been used for centuries, and Diageo
emphasized that Bill Samuels admitted that the inspiration for the Maker’s Mark
freeform wax coating was old cognac bottles that had wax seals with an
irregular or uneven edge. Maker’s Mark’s
experts admitted that numerous other bourbons and other spirits have used red
wax seals or dripping wax seals. Wines
and even beers have also used wax seals, many of them red, and many with
tendrils. Non-alcoholic products such as
olive oil and vinegar have also used red dripping wax seals. So why should Maker’s Mark get special
protection?

You could have guessed the answer
to that question by reading just the opening lines of the Sixth Circuit’s May
9, 2012 ruling, which followed with a
veritable history lesson about bourbon, discussing:

·the
origin and history of bourbon;

·the
difference between “whiskey” and “bourbon;”

·the
different spelling between “whiskey” and “whisky;”

·bourbon
mash bills and Dr. James Crow’s perfection of the sour-mash method;

·early
marketing of bourbon and early fans, like Ulysses S. Grant and Henry Clay;

·the
rise and fall of rectifiers and President William Taft’s 1909 interpretation of
the 1906 Pure Food and Drug Act;

·distiller
consolidation after the repeal of National Prohibition;

·more
name-dropping of bourbon fans, like President Harry S. Truman and Ian Fleming,
who reportedly switched from martinis to bourbon;

·the
action of Congress, in 1964, to designate bourbon as a distinctive product of the United States, and Federal Regulations prescribing restrictions on which distilled spirits may be called "Bourbon;"

·the
Samuels family’s important role in the history of bourbon (“Maker’s Mark
occupies a central place in the modern story of bourbon.”), including having
been distillers since 1783; and

Despite spending four pages on this significant history, the
Circuit Court did not discuss any of the even longer history of tequila (16th
Century) or Jose Antonio de Cuervo’s purchase of a blue agave farm from King
Ferdinand VI of Spain (1758), and instead wrote a mere three sentences, only to
reference the name of the Cuervo brand, its initial use of a straight-edged wax
seal, and its transition in 2001 to a “red dripping wax seal reminiscent of the
Maker’s Mark red dripping wax seal.”
Then the Circuit Court went on to affirm the injunction and the award of
costs to Maker’s Mark, protecting Maker’s Mark’s exclusive use of its red
dripping wax seal.

Other bourbon brands still use wax
seals, like my bottles of Evan Williams Single Barrel, Michter’s 10-Year Single Barrel and Knob Creek (like Maker’s
Mark, also owned by Beam, Inc.), among many
others.

But these are all black wax, and all neatly trimmed. My guess is that no other current bourbon brand
is willing to use red wax at all, and
that we won’t see freeform tendrils of any color. And that seemed to be part of the District
Court’s reasoning for imposing an injunction:
the Court recognized that its ruling “also protects Maker’s Mark from
other competitors or quasi-competitors in the industry, in that it may serve to
discourage them from treading too closely on the mark.” Mission accomplished.

Update:

Here's a picture with retired federal Circuit Court Judge Boyce F. Martin, Jr., the author of the Court of Appeals opinion, when Judge Martin and I were filmed in January 2015 for the upcoming documentary Straight Up: Kentucky Bourbon from Beard Force Films.

2 comments:

I am pleased that bourbon won this case, not because I care especially for ownership of any mark, merely that I am happy for the bourbon. I appreciate the interesting article, which goes beyond the usual "tasting" ones that, although are read as well, are widely available. This kind is rare and spices it up some.